Bearish Sentiment Spikes amid Tariff Impact and Slowing Growth Concerns
The majority expect a tough quarter for Industrials and describe the global economy as “losing steam”
- Neutral to Bearish and Bearish investor sentiment more than doubled QoQ, while those classifying management tone as such similarly jumped to 37% from 4% last quarter
- More than half believe earnings will Decrease sequentially and come in Worse Than consensus, tripling QoQ; expected misses register at the highest level since Dec. 2015
- Trade conflict is cited as the top concern for the fourth consecutive quarter
- 81% express High concern and 64% believe a favorable resolution to the U.S./China trade dispute over the next six months is only Somewhat likely
- 65% note the U.S. economy is Losing Steam, though 63% Do Not believe we will enter a recession in the next 12 months
- 27% report Selling investments, an increase from 18% QoQ; Net Buyers fell to 9% from 27%
HARTFORD, Conn. – July 18, 2019 – Corbin Advisors, a research and advisory firm specializing in investor relations (IR), today released its quarterly Industrial Sentiment Survey, which reveals investor sentiment and perceived management tone register at the most downbeat levels in over three years as tough comps and headwinds mount. The survey, part of Corbin Advisors’ Inside The Buy-side® publication, is based on responses from 35 institutional investors and sell-side analysts globally who actively follow the Industrial sector. Buy-side firms manage $978 billion in assets and have ~$101 billion invested in Industrials.
Findings reveal that significant uncertainty with tariffs and the extent to which growth will slow is weighing on Industrials. Trade conflict is cited as the top concern for the fourth consecutive quarter, as 81% express High concern and 64% believe a favorable resolution to the U.S./China trade dispute over the next six months is only Somewhat likely. Furthermore, 65% note the U.S. economy is Losing Steam, but the majority, 63%, Do Not foresee a recession occurring in the next 12 months. Capturing the general theme from this quarter’s survey, Steven Gattuso, Senior Portfolio Manager at Courier Capital commented, “I expect earnings and guidance to come in below consensus owing to a slowing global economy and rising input costs due to tariffs.”
To that end, all key performance indicators – Revenue Growth, EPS, Margins and Cash Flow – are expected to Stay the Same or Worsen quarter-over-quarter. More than half believe earnings will Decrease sequentially and come in Worse Than consensus, the highest level registered since December 2015, while 49% expect 2019 Industrial organic growth rates to be 2.5% or lower, on average, compared to 39% last quarter.
“Our survey this quarter captured more downbeat sentiment and cautious expectations as nearly all global economies are anticipated to moderate. Investors are not expecting a recession but are telegraphing tempered outlooks,” commented Rebecca Corbin, Founder and CEO of Corbin Advisors. “In a quarter where the majority expect challenging results for Industrials, investors are engaging in stock picking and pruning as pockets of weakness grow, particularly in China and Europe. Companies with financial wherewithal, conservative balance sheets and cycle-tested management teams will prove to have a competitive advantage. Earnings calls should be utilized to address global growth demand and geographic trends, cost containment strategies and back half 2019 outlooks. We expect higher-than-average downward guidance revisions.”
In terms of sector bets, Aerospace & Defense remains at the top of the bull’s board and Residential Construction, Building Products and Water see the most significant shifts in positive sentiment. Auto remains the biggest laggard, while Machinery and Ag falter.
About Corbin Advisors
Corbin Advisors is a specialized investor relations (IR) advisory firm that partners with C-suite and IR executives to drive long-term shareholder value. We bring third-party objectivity as well as deep best practice knowledge and collaborate with our clients to execute sound, effective investor communication and engagement strategies. Our comprehensive services include perception studies, investor targeting and marketing, investor presentations, investor days, specialized research, and retainer and event-driven consulting.
Since 2006, Corbin Advisors has tracked investor sentiment on a quarterly basis. Access Inside The Buy-side® and other research on real-time investor sentiment, IR best practices and case studies at CorbinAdvisors.com. To see Founder and CEO Rebecca Corbin discuss 2Q19 Earnings on CNBC, Please Click Here.
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